G-20 chiefs face tough task on exchange rates
G-20 chiefs face tough task on exchange ratesSouth Korea meeting is aimed at disarming 'currency war' threat
by Kelly Olsen - Oct. 22, 2010 12:00 AM
Associated Press
GYEONGJU, South Korea - Global finance mandarins get another chance this week to defuse international currency tensions as a festering dispute over exchange rates overshadows debate about reforming the world economy.
Finance ministers and central-bank governors from the Group of 20 rich and emerging nations, along with key officials from international finance and lending organizations, meet today and Saturday in the South Korean city of Gyeongju. Their deputies met Thursday.
The gathering comes just two weeks after they failed at a meeting in Washington to iron out differences that have led to fears the world could descend into a so-called currency war that causes another downturn.
In such a scenario, countries devalue their currencies to gain a competitive advantage over competitors in a less-than-robust world economy that has yet to fully recover from the effects of the global financial meltdown two years ago. Trade barriers are erected in response, hitting international commerce and sending the economic recovery into reverse.
The Gyeongju meeting also offers the last chance to calm such anxieties ahead of a summit of the group's leaders scheduled next month in Seoul.
David Cohen, head of Asian forecasting at Action Economics in Singapore, said the finance meeting represents a "real test" for the G-20 given the prominence it has assumed in leading the global economy.
"I think there's a lot of pressure on them," Cohen said. "I think they understand that it's in no country's interest to revert to a currency war."
Currencies, long a source of contention, face renewed focus amid broader strains in the global economy left over from the financial crisis.
China, the world's No. 2 economy, is under renewed pressure over its management of the yuan, which the U.S., the European Union and Japan say is undervalued, giving its exporters an unfair competitive advantage.
The broad weakening of the dollar amid poor prospects for the U.S. economy and the outlook for possible further monetary easing by the Federal Reserve is another factor adding to the strain.
And hot-money investment, which flows into emerging countries in search of higher yields than can be fetched in the developed world, have turned up the heat on those currencies, particularly in Asian nations such as South Korea.
U.S. Treasury Secretary Timothy Geithner told the Wall Street Journal that part of the problem is "there is no established sense of what's fair" amid a diverse currency landscape.
China would have a key role to play in achieving any currency accord. Beijing, however, has said it sees no reason for the exchange-rate issue to even be taken up by the G-20.
Still, Yim Jong-ryong, first vice minister at South Korea's Ministry of Strategy and Finance, expressed optimism some kind of deal may be reached on currencies.
China's central bank said Tuesday that it hiked its key interest rate by a quarter of a percentage point, to 2.5 percent.
http://www.azcentral.com/arizonarepu...onomy1022.html
G-20 chiefs face tough task on exchange ratesSouth Korea meeting is aimed at disarming 'currency war' threat
by Kelly Olsen - Oct. 22, 2010 12:00 AM
Associated Press
GYEONGJU, South Korea - Global finance mandarins get another chance this week to defuse international currency tensions as a festering dispute over exchange rates overshadows debate about reforming the world economy.
Finance ministers and central-bank governors from the Group of 20 rich and emerging nations, along with key officials from international finance and lending organizations, meet today and Saturday in the South Korean city of Gyeongju. Their deputies met Thursday.
The gathering comes just two weeks after they failed at a meeting in Washington to iron out differences that have led to fears the world could descend into a so-called currency war that causes another downturn.
In such a scenario, countries devalue their currencies to gain a competitive advantage over competitors in a less-than-robust world economy that has yet to fully recover from the effects of the global financial meltdown two years ago. Trade barriers are erected in response, hitting international commerce and sending the economic recovery into reverse.
The Gyeongju meeting also offers the last chance to calm such anxieties ahead of a summit of the group's leaders scheduled next month in Seoul.
David Cohen, head of Asian forecasting at Action Economics in Singapore, said the finance meeting represents a "real test" for the G-20 given the prominence it has assumed in leading the global economy.
"I think there's a lot of pressure on them," Cohen said. "I think they understand that it's in no country's interest to revert to a currency war."
Currencies, long a source of contention, face renewed focus amid broader strains in the global economy left over from the financial crisis.
China, the world's No. 2 economy, is under renewed pressure over its management of the yuan, which the U.S., the European Union and Japan say is undervalued, giving its exporters an unfair competitive advantage.
The broad weakening of the dollar amid poor prospects for the U.S. economy and the outlook for possible further monetary easing by the Federal Reserve is another factor adding to the strain.
And hot-money investment, which flows into emerging countries in search of higher yields than can be fetched in the developed world, have turned up the heat on those currencies, particularly in Asian nations such as South Korea.
U.S. Treasury Secretary Timothy Geithner told the Wall Street Journal that part of the problem is "there is no established sense of what's fair" amid a diverse currency landscape.
China would have a key role to play in achieving any currency accord. Beijing, however, has said it sees no reason for the exchange-rate issue to even be taken up by the G-20.
Still, Yim Jong-ryong, first vice minister at South Korea's Ministry of Strategy and Finance, expressed optimism some kind of deal may be reached on currencies.
China's central bank said Tuesday that it hiked its key interest rate by a quarter of a percentage point, to 2.5 percent.
http://www.azcentral.com/arizonarepu...onomy1022.html